New Homes Bonus needs better scrutiny, say MPs

Building site Some councils could lose out on central funding as a result of the New Homes Bonus, the NAO says

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The government is not "adequately" monitoring the spending of its £1.3bn New Homes Bonus, aimed at boosting housebuilding, Whitehall's spending watchdog has warned.

The scheme, which sees councils getting payments when homes are created in the area, was introduced in 2011.

But the National Audit Office argued an official estimate that this would help 140,000 households over 10 years was based on "limited evidence".

The government said this was "unfair".

The coalition estimates that population growth means 232,000 extra homes will be required each year until 2033.

To this end, it set up the New Homes Bonus, providing local authorities with payment for every property added to their council tax register, after deducting recent demolitions.

These may be newly built, conversions or empty homes being returned to use.

For each new home, the Department for Communities and Local Government pays an amount equivalent to the national average for its council tax band every year for six years.

So a local authority adding a band D home to its council tax base between October 2011 and October 2012 will receive £1,444 per year for the six years from 2013-14 to 2018-19, or £8,664 in total.

An extra £350 per year is paid for each property that is deemed "affordable".

Review

The National Audit Office (NAO) said: "The scheme aims to deliver 140,000 new homes over the next 10 years.

"While, as expected, it is too early for it to have had a discernible influence on the number of new homes, the financial risk to some local authorities is substantial because of the redistributive nature of the scheme."

It added: "Some local authorities, particularly in areas where developers are less likely to want to build new homes, face losing large amounts of their funding from central government.

"These authorities face growing financial risks, including to future service delivery."

The government is planning to carry out a review of the New Homes Bonus over the next year.

However, the NAO said ministers had "not decided upon its scope or methodology" and said the assessment had to be carried out "urgently".

The report also said: "The department estimated that the scheme would deliver around 140,000 additional new homes over its first 10 years, increasing the supply of housing by between 8% and 13%.

"The new homes estimate was produced using very limited evidence. The estimate also contained an arithmetical error which significantly increased estimated construction rates."

According to the NAO, the correct calculation should have been 6% to 11%, or 108,000 homes - 32,000 fewer than originally expected.

'Irresponsible'

The Local Government Association, which represents councils, agreed with the NAO, saying: "Mistaken forecasts and a lingering uncertainty over future income from the New Homes Bonus are hampering councils' efforts to plan their medium to long-term budgets."

But housing minister Mark Prisk said: "This report is unduly negative and unfair. Housing supply is up and planning approvals are up. We are getting Britain building.

"The reality is that the New Homes Bonus has already rewarded councils for the delivery of 450,000 homes and we are confident that it has the potential to increase supply by at least 100,000 homes over 10 years.

"The old top-down system under the previous government built nothing but resentment, and saw housebuilding plummet to its lowest peacetime levels since the 1920s.

"The New Homes Bonus provides a real incentive for communities to grow, to provide more affordable housing and to get empty homes back into use. It is simple and fair to all parts of the country. Councils which build more homes, receive more funding."

For Labour, shadow housing minister Jack Dromey said: "It is extraordinarily irresponsible that ministers haven't bothered to assess whether the £1.3bn they are spending is a good use of taxpayers' money.

"The New Homes Bonus symbolises the government's failing housing policies. They are failing to increase housebuilding and the government has grossly overestimated its impact, promising much and delivering little."

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